Summary of District of Columbia Laws

Tax

Sales and Use Taxes

Sales Tax: This is a tax imposed on vendors for the privilege of selling certain tangible personal property and services at retail. Reimbursement is required to be collected by the vendor from the purchaser. D.C. Code Ann. §§ 47-2002 to 47-2004.

The Catholic University of America (the "University") is required to collect sales tax on taxable sales and rentals despite the fact that the University, itself, is exempt from paying sales tax on its own purchases. The District of Columbia gross sales tax is imposed for the privilege of selling tangible personal property and specified taxable services at retail.[1] All receipts from the sale of tangible personal property and services are presumed to be subject to tax. A vendor or purchaser has the burden of proof on proving an exception to the tax.[2] A "Retail Sale," meaning a taxable sale, includes the following:

· sales of food and drink prepared for immediate consumption or sold from vending machines

· snack food

· production, fabrication or printing tangible personal property on special order

· laundering, dry cleaning or pressing of tangible personal property (except with performed by self-service, coin operated equipment) and the rental of textiles to commercial users when the essential part of the rental includes the recurring service of laundering or cleaning

· parking, storing or keeping motor vehicles or trailers

· service or real property maintenance and landscaping

· data processing and information services

· newspapers or publication (unless distributed by the publisher at no charge)

· specific telecommunication services (except for such services subject to the utility tax)

· deliveries in the District for which a separate charge is made (except deliveries for resale)

· employment services for employers and job seekers

What is exempt from taxation?

Exemptions are divided into two types. The first relates to the nature of the purchaser. The second relates to the nature of the transaction.

A semi-public institution is defined as a corporation, community chest, fund, or foundation organized exclusively for religious, scientific, charitable, or educational purposes.[3] Such an institution must apply for exemption from the sales tax and on the granting of that application, a certificate of exemption is issued and the entity is given a sales tax exemption number.

If the University sells tangible personal property to, or leases lodging space to, a semi-public institution, no sales tax need be collected from the institution or paid to the District of Columbia by the University.

For this exemption to apply, the institution must present a valid Certificate of Exemption, the food and/or lodging must be paid for by the institution (not the individual participants) and the University must maintain records of each sale, including the institutions certificate number, its name, the date of the transaction, and the amount of the sale. In addition, the purchase must be used in an activity that is in furtherance of the purpose for which the institution was organized or to honor the institution or its members.

As regards the nature of the transaction, D.C. law includes thirty-three categories of exempt transactions, not all of which would be relevant to the University's activities. Those exemptions which may be relevant would include the following:

· Sales of food and drink, except when sold for immediate consumption or snack food[5]

· Casual or isolated admissions charged by a semipublic institution[6]

· Meals and food served to pupils, students, or patients by semipublic personal or professional service institutions (or organizations) holding certificates of exemption. This exemption applies to those institutions whether the meals are provided with or without charge. The furnishing of such meals and food is considered to be exclusively for maintaining, conducting, and rendering the service for which the institution is organized and operated. Although the regulations do not actually state that the "pupils" or "students" must be attending the entity providing the food, a reasonable reading of the statute and regulations would suggest such a conclusion.[7]

Rates of Tax

Effective Oct. 1, 2009 the general rate of the District of Columbia sales tax is 6%. [8]

3. 14.5% (10% plus 4.5% convention center surtax) from charges for rooms, lodging, or accommodations furnished to transients. Prior to the implementation of this rage in 1998, this tax was 13% and that was the rate back to October 1, 1994.

4. Effective October 1, 2011, 18% of gross receipts from the sale of, or charges for, the service of parking or storing motor vehicles of trailers.

The sales tax is deemed to be a tax on the vendors who must may seek reimbursement of the tax from purchasers at the time of sale.[10] The tax due must be paid by the vendor regardless of whether the taxes were actually collected by the vendor from the purchaser. The tax is based upon the gross receipts from the sale of tangible personal property and taxable services. Losses and expenses are not deductible, but cash discounts, rescinded sales where complete refund is made, and certain separately stated installation charges are excludable. Vendors are allowed a credit for the timely reporting and payment of tax equal to the lesser of $5,000 or 1% of the gross tax remitted.

Every person making sales subject to the tax must obtain a certificate of registration from the District of Columbia Department of Finance and Revenue and surely the University has done so.[11] Once an entity has secured a certificate of registration, vendors must file returns with the Department of Finance and Revenue on or before the 20th day of each month. Vendors are also required to file annual reports with the Mayor on or before 30 days after the end of the tax year of such vendors. The tax is to be paid to the Department of Finance and Revenue at the time the monthly returns are filed.

[7] D.C. Regs. §443.2: "The furnishing of such meals and food products is considered to be exclusively for the purpose of maintaining, conducting and rendering the service for which those institutions are engaged and operated."

Use Tax: This is a tax imposed jointly on vendors engaging in business in the District and on purchasers which tax the use, storage, or consumption of tangible personal property or services sold or purchased at retail in the District. The vendor is required to pay the tax and collect it from the purchaser who will otherwise be required to pay if the purchaser does not reimburse the vendor. See D.C. Code Ann. §§ 47-2202, 47-2003, and 47-2005.

There is also a "compensating-use" tax imposed that complements the sales tax by taxing retail sales that may not otherwise be subject to the sales tax. D.C. Code Ann. § 47-2202. Also see DCMR tit. 9, §§ 405.1 and 405.16.

Exemptions: Sales to semipublic institutions are exempt from sales tax (and thus exempt from the use tax). A "semipublic institution" is a corporation, fund, or foundation organized exclusively for religious, scientific, charitable, or education purposes. Sales to such institutions are exempt if they also meet the requirements listed under D.C. Code Ann. § 47-2005(3). To be considered a semipublic institution or organization and thus receive exemptions from District income-franchise, sales and use, personal property, and arena taxes, the District specifies that the organization must meet certain requirements. These requirements include: must have an exemption certificate, record of sale by vendor with sales date and certificate number, the institution is in the District and the activities are performed to a substantial extent in the District and substantially for the benefit of the District. See D.C. Mun. Regs. tit. 9, § 418.

Questions and Answers

Q. If the university co-sponsors an academic conference with two other non-proficts, and provides food as an integral part of the conference, which is included in the cost, does the university need to collect sales tax on the portion of the conference attributable to the food?

A. No. The registration payment is payment for the conference, and not the food, so no sales tax need be collected.

Q:Whether a school must collect sales tax on a homecoming dinner put on by Alumni Affairs. The tickets to the dinner are $10 per ticket.

A. The sale of "food for immediate consumption," i.e., meals, by the University is exempt only if the sale is to "pupils" or "students." The sale of meals to others by the University would be taxable. Meals sold to alumni in the context of homecoming would be taxable.

Q: Whether a school must collect sales tax on the cost-recovery admission fee which will defray the costs of the graduation event that is to be held in the future.'

A. DC Code 47-2001(n)(1)(H) states, 'The sale of or charges for admission to public events, except live performances of ballet, dance, or choral performances, concerts (instrumental and vocal), plays ( with and without music), operas and readings and exhibitions of paintings, sculpture, photography, graphic and craft arts, but including movies, circuses, burlesque shows, sporting events and performances or exhibitions of any other type or nature; provided, that any casual or isolated sale of or charge for admission made by a semipublic institution not regularly engaged in asking such sales or charges shall not be considered a retail sale or sale at retail:

The District determined that twelve (12) or less taxable events a year held by a semipublic institution would be considered a casual or isolated sales exempt from sales tax. Should the taxable events exceed twelve (12), the sales of or charges for admission to each event, including the first twelve (12), would be subject to the sales tax. For the purpose of computing twelve (12) events, each event must be considered as a separate one regardless of where it has been held (within or without the District) or the number of times it has been held daily.

For a link to more Questions and Answers, specifically on Summer Conference and Events, click Here.

Resources:

Q. Must CUA collect sales tax on journals sold (e.g. a journal on Canon Law)?

A. Sales tax is to be collected on sales of tangible personal property (like a journal) unless exempted. A journal sale at retail would be subject to sales tax. A sales to a reseller would not be a sale at retail and no sales tax would be due. Generally, resellers are required to produce a "reseller's certificate."

If the Press sells journals at retail to residents/businesses in DC, sales tax would be due. A mail order sale to another jurisdiction is more complex. If CUA is doing business in the other jurisdiction, the other jurisdiction's sales tax must be collected. If CUA is not doing business in the other jurisdiction, no sales tax would generally be due, but those laws are in transition as states attempt to pick up lost sales tax revenues on Internet sales. Amazon must now, for example, collect sales tax on sales to residents of some states even though Amazon has no presence in that state. A state by state analysis may be needed.

Answer courtesy of Attorney Thomas Arden Roha (Roha and Flaherty)

10/14/11 KVP updates rates of tax for parking charges

2/26/10 updated to update general sales tax and add link to DC page
3/14/11 updated by MLO to add Roha Q and A on sales tax